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Car tax changes in 2017 and 2018 – what do I need to know?

The UK's car tax (VED) bandings were given a massive shake-up in April 2017 and they'll be changing again in April 2018. Here, you can check the 2017 car tax rates for all new cars, including the cost of their first year (or 'showroom' tax), and find out what's happening next to car tax rates

Words ByDarren Moss

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A radical overhaul of the UK's system for taxing cars, known as Vehicle Excise Duty, or VED came into force from 1 April 2017, making many cars much more expensive to run. Further changes were introduced in the 2017 Autumn Budget.

What is happening to car tax in 2018?

From 1 April 2018 the first-year VED tax rate for new diesel cars will go up by one band. In addition, the company car tax levied on diesel cars will increase from 3% to 4%.

The new rules only apply to cars, not vans or commercial vehicles, and the extra cost is only payable for models that don't meet the latest Euro 6 emissions standards when tested on the RDE new real-world emissions regime. At present no new diesels conform to the RDE standards, so the extra fee will apply to all new diesels sold. For a Ford Focus diesel with 99g/km CO2 emissions the cost of the first year's tax will rise by Β£20 to Β£145 and for a Range Rover Evoque SD4 (153g/km CO2) showroom tax will rise by Β£315 to Β£830.

Find out more about the new car tax costs and other changes announced in the 2017 Autumn Budget

What happened to car tax in 2017?

As before, the amount of VED you pay is still based partly on your car's CO2 emissions. However, while the Government had been trying to push people into hybrid vehicles by making many of them free to tax, the benefit of choosing one of these was substantially reduced from 1 April.

New cars are still divided into 13 CO2 bands, which determine how much you pay in the first year of ownership. However, only zero-emission vehicles, such as electric cars, now qualify for the lowest band and are therefore tax-free.

From the second year onwards, zero-emission vehicles that cost less than Β£40,000 new remain free to tax, while a flat rate of Β£140 a year is payable for petrol and diesel cars that cost less than Β£40,000, while hybrids cost Β£130. All cars that cost more than Β£40,000 attract an additional 'Premium' fee of Β£310 for years two to six of ownership, regardless of their emissions.

This means that electric cars that cost more than Β£40,000 – and which currently qualify for free car tax every year – will no longer be the tax-busting option they are currently.

Bear in mind, too, that it's the final list price of your car that determines the Β£40,000 threshold – if you buy a cheaper model but add options that take the price over that point, you'll still have to pay the Premium fee. In short, an option costing a few hundred pounds could end up costing you more than Β£1500 over five years in extra car tax costs.

Even if you negotiate a discount with the dealer that drops the price of the car back below Β£40,000, you'll have to pay the fee because the listed price will still be more than Β£40,000. The list price includes the delivery charge, numberplates and fuel, but not the new car registration fee.

Below, you'll find a full table detailing how much you have to pay in the first year and thereafter.

VED car tax bands for cars registered on or after 1 April 2017

Emissions (g/CO2/km) First year rate Standard rate*
0 Β£0 Β£0
1-50 Β£10 Β£140
51-70 Β£25 Β£140
76-90 Β£100 Β£140
91-100 Β£120 Β£140
101-110 Β£140 Β£140
111-130 Β£160 Β£140
131-150 Β£200 Β£140
151-170 Β£500 Β£140
171-190 Β£800 Β£140
191-225 Β£1200 Β£140
226-255 Β£1700 Β£140
over 255 Β£2000 Β£140

*Cars costing more than Β£40,000 pay Β£310 supplement for five years

How will the new bandings affect the cost of my next car?

The new rules still make it financially rewarding to own some pure electric cars. If you're looking for something like a Nissan Leaf, BMW i3 or Renault Zoe, then you will still pay no car tax.

If you're thinking of a premium electric car such as a Tesla Model S, however, then it will cost you much more to own because of the new Β£310 Premium supplement. Our advice here is to look for a car first registered before 1 April 2017 (find out more below).

Some of the hardest-hit cars are low-emission combustion-engined models and hybrids. Take the Nissan Qashqai, a former What Car? Car of the Year. Our favourite 1.5 dCi N-Connecta version emits just 99g/km of CO2; this meant, under the previous VED system, it qualified for free car tax. However, now the same car will cost you Β£120 in the first year and Β£140 thereafter. Over three years, that's an extra Β£400.

Vehicles that produce higher emissions and more eco-friendly models with a list price of more than Β£40,000 are even more severely penalised. So if you're thinking of buying a car with a big diesel engine, such as the Range Rover Sport 3.0 SDV6, you may want to reconsider, because the cost of taxing it for three years is doubling from Β£815 to Β£1700. This is because its relatively high emissions mean you have to pay more car tax in the first year, and then the Β£310 Premium fee on top of the Β£140 standard rate for the following five years.

In contrast, cars that were 'dirty' enough to be in the top tax band previously actually work out cheaper if you keep them for more than five years.

What about second-hand cars registered before 1 April 2017?

If you bought your car before 1 April 2017 or buy a second-hand car that was registered before this date, you won't be affected by these changes because they only apply to cars registered on or after that date. Older cars will continue to be taxed according to the old system of CO2 emissions, meaning that, in the vast majority of cases, you'll be better off. Below are tax rates for cars registered before 1 April from the second year onwards.

VED band CO2 emissions (g/km) Annual rate
A Up to 100 Β£0
B 101 - 110 Β£20
C 111 - 120 Β£30
D 121 - 130 Β£115
E 131 - 140 Β£135
F 141 - 150 Β£150
G 151 - 165 Β£190
H 166 - 175 Β£220
I 176 - 185 Β£240
J 186 - 200 Β£280
K 201 - 225 Β£305
L 226 - 255 Β£520
M Over 255 Β£535

So, how much more does it cost to own a new car under the revised tax system? What Car? has worked out the costs over three years for some of the UK's most popular models. Click through to the next page to view the results.

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